​How SALT Deductions Impact Your Taxes

Those hoping for a repeal of the federal limits for state and local tax — or SALT — deductions will likely have to keep waiting. The latest COVID-19 relief package probably won’t include a measure to remove the cap on SALT deductions.

As a refresher, taxpayers in high-tax states previously had no limits on the amount of state and local taxes they could include in itemized deductions on their federal income tax returns. The Tax Cuts and Jobs Act passed in 2017 limits SALT itemized deductions to $10,000.

That $10,000 limit is important to note because in 2021, the standard deduction for single filers is $12,550. So, if you plan to itemize your deductions in 2021, you’ll need another $2,550 in allowable itemized deductions to do so.

SALT deductions include property, income, and sales taxes. Taxpayers who itemize can deduct property taxes and either income taxes or sales taxes but not both.

Figuring out whether you should take the standard deduction or itemize can take a little math. Run the numbers both ways to see what’s right for you.

If you run into an issue or a question, don’t hesitate to reach out to us.